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I agree the current model is broken and I also think this can improve it incrementally...but I think this problem needs to be rethought from the ground up. I t
by davemel37 11y ago
I agree the current model is broken and I also think this can improve it incrementally...but I think this problem needs to be rethought from the ground up.
I think multiple bidding strategies or price comparison is inherently flawed for service businesses. It forces adverse selection on both sides. Essentially, to the buyer, all contractors are vetted, licensed, and have insurance, and they have no other context, so they are forced to choose the cheapest bid.
However, the sellers (contractors) don't know what type of client this is, how much they might try to change scope, or what the actual project might end up costing, so they are forced to charge as much as possible to cover the unknown.
By forcing them to bid on the project, the better contractors, who are more aware of the potential costs and risks will bid higher than the less competent ones.
Essentially, this will skew the process in a way that the customer will always end up with the worst vendor.
Further, the contractor needs to confirm price upon inspection. If this leads to changing bids, as most industries do, either the customer will be too annoyed with your site and the contractor, or just go with the new bid...and contractors will quickly learn to bid low and quote higher on site.
I would love to hear your thoughts about this and how you hope to overcome adverse selection from a bidding model.
For what it's worth, I have my own ideas for the space, but they aren't technology driven solutions, they are people driven solutions.
- SocksCanClose 11y ago@davemel37 I like where you're going with this, and I agree that this is a very good problem to address. I wonder if you could design some sort of system similar to Uber pricing algo where you give an estimate ("[Startupname] believes that this job will cost between $70 and $120"), and then include various multiples (I imagine that getting a window repaired in Menlo Park will cost more than doing so in Topeka, KS) for locality, current demand, etc.
- theoconn 11y ago@SocksCanClose Thanks for adding to the ideas. The range is a great way to do it. range for the bid with an explanation in the video by a contractor. The video bid makes it much easier for a contractor to express his knowledge and expertise to convince the consumer that he is right for the job. A price (in the bid range ideally) gets confirmed upon inspection of the job and the money gets held in escrow.
- davemel37 11y agoI think the challenge is in consumer psychology and emotional fear of looking like a fool more than the need for better data. This is why recommendations from friends and neighbors is the go to solution today. I specifically think the problem is in information asymmetry about the true costs to service the project. Especially considering that some jobs or parts of jobs need deep expertise and others are contracted out to the cheapest labor possible. In other words...there are things the contractor knows that they consider trade secrets and wouldnt want to reveal them...that is what consumers need to know to be comfortable IMO. I have a project I am working on along those lines, but its not trchnology driven.
- theoconn 11y agoThanks for the comment @davemel37. Excellent points. I have been playing around with this issue because I agree the bid system is flawed. Just as when contractors come to the house to bid, I want to go with the lowest bidder but then fear I'll be getting the worst work. Many times I choose based on price and a gut feeling after discussing the project. I believe the way to overcome this is video replies by the contractor discussing the job. The reply will give a customer a sense of the contractor and their knowledge/experience for the project. The ability to bid with a video combined with a range bid explaining in the video gets both parties closer to an informed decision they could get with an in person inspection. The video record on both sides will also assist a mediator in reviewing the project. After the consumer picks a bid, the contractor will inspect the job and confirm or revise price on site. The new price must be agreed to by consumer and money for the job put in escrow with FixSmarter. If a contractor opens up a wall and finds mold or something else living in the house, the parties would then be able to revise price and increase escrow. As the site progressed, I envision it could act as a virtual construction manager where the job is broken down into segments so that escrow can be released along the way (but this would be down the road). The system is flawed generally and I'd love to hear your ideas. I think this solution takes a big step forward because it addresses two big concerns- price certainty for the consumer (revised with full disclosure when unforeseen problems arise) and payment for the contractor. I greatly appreciate your input.